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Exhibit 10.34
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of May 9, 2000,
by and between GVI Security, Inc., a Delaware corporation ("Purchaser"), and
Sensory Science Corporation, a Delaware corporation ("Seller").
R E C I T A L S
WHEREAS, Seller is a public company engaged principally in the business
of development and distribution of consumer electronic products;
WHEREAS, Seller operates, and desires to dispose of, a division (the
"Division") engaged in the business of the marketing, distribution and sale of
security and surveillance products (the "Business");
Purchaser desires to purchase certain assets used in the Business and
Seller desires to sell such assets to Purchaser, all on the terms and subject to
the conditions of this Agreement.
NOW, THEREFORE, in consideration of and reliance on the respective
representations, warranties and covenants contained herein and intending to be
legally bound hereby, Purchaser and Seller agree as follows:
ARTICLE I
DEFINITIONS
The following words and terms are used in this Agreement and have the
meanings ascribed to them in this Article I or at the locations in the Agreement
indicated below:
"Accounts Receivable" is defined in Section 2.1(a).
"Acquisition" is defined in Section 2.7.
"Action" is defined in Section 4.16.
"Assets" is defined in Section 2.1.
"Assumed Liabilities" is defined in Section 2.2.
"Authorization" is defined in Section 3.11(a).
"Balance Sheet" is defined in Section 3.5.
"Balance Sheet Date" is defined in Section 3.5.
"Benefit Plan" is defined in Section 3.18(a).
"Business" is defined in the Recitals.
"Closing" is defined in Section 2.7.
"Closing Date" is defined in Section 2.7.
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"Contracts" is defined in Section 3.15.
"Division" is defined in the Recitals.
"Excluded Liabilities" is defined in Section 2.3.
"Field" is defined in Section 5.7.
"Financial Statements" is defined in Section 3.5.
"Fixed Assets" is defined in Section 2.1(d).
"Governmental Entity" is defined in Section 3.3.
"Indemnitee" is defined in Section 10.4.
"Indemnitor" is defined in Section 10.4.
"Liens" is defined in Section 3.9.
"Losses" is defined in Section 10.1.
"Mark" is defined in Section 5.7.
"Material Adverse Effect" is defined in Section 3.1.
"Names" is defined in Section 2.1.
"Noncompetition Period" is defined in Section 7.2(a).
"Non-Assignable Contract" is defined in Section 2.7.
"Notice of Claim" is defined in Section 10.4.
"Permitted Liens" is defined in Section 3.9.
"Person" is defined in Section 10.12.
"Plan" is defined in Section 3.18(a).
"Product Return" means any product of the Business sold by Seller prior
to the Closing Date to a third party for resale and which, in accordance with
the terms of such sale, may be returned by such third party to Seller if such
product remains unsold at the end of the period specified in such terms of sale.
"Purchase Price" is defined in Section 2.4.
"Purchaser Disclosure Schedule" is defined in the preamble to Article
IV.
"Purchaser Indemnified Parties" is defined in Section 10.1.
"Regulation" is defined in Section 3.11(a).
"Restricted Business" is defined in Section 7.2(a).
"Seller Disclosure Schedule" is defined in the preamble to Article III.
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"Seller Intellectual Property Rights" is defined in Section 3.13(a).
"Seller Third-Party Intellectual Property Rights" is defined in Section
3.13(b).
"Tax" is defined in Section 3.7(a)
"Tax Returns" is defined in Section 3.7(a).
"Third-Party Claim" is defined in Section 10.5.
"Third-Party Defense" is defined in Section 10.5.
"Transaction Documents" is defined in Section 3.2.
"Transitional Services" is defined in Section 7.5.
"Knowledge." When any of the representations and warranties of any
Person are qualified by the expression "to the knowledge of" or any similar
expression, such representations and warranties shall be deemed to be given to
the best knowledge of such Person and, if such Person is Seller, then to the
actual knowledge of the Chief Executive Officer, Chief Financial Officer and
Senior Vice President, Sales of Seller, and the knowledge that would reasonably
be expected to be obtained by such persons after reasonable inquiry concerning
the subject matter.
"Affiliate" means, with respect to any Person, any individual,
corporation, partnership or other entity which directly or indirectly controls,
is controlled by or is under common control with, such Person.
ARTICLE II
PURCHASE AND SALE OF THE BUSINESS AND THE ASSETS
2.1 Purchase and Sale Seller, subject to the terms and conditions of
this Agreement and the other Transaction Documents, shall sell, transfer, convey
and deliver to Purchaser, free and clear of all Liens other than Permitted
Liens, all of the Company's right, title and interest in and to (a) the Business
as a going concern, (b) the trade names GVI Security, Seeing is Believing and
Private Eye (the "Names") and the goodwill associated therewith, and any and all
marks associated therewith, and (c) the assets used or held for use in
connection with the Business as set forth below (the "Assets"):
(a) all accounts receivable outstanding as of the Closing Date
derived from sales of security products and provision of related
services to (i) all customers of the Business, and (ii) all sales
representatives who represent Seller in its sales of security products
(collectively, the "Accounts Receivable");
(b) all rights under the Contracts listed on Schedule 2.2(c)
and any other instruments, registrations, licenses, certificates of
occupancy, other permits or approvals of any nature, or other
documents, commitments, arrangements, undertakings, practices or
authorizations held for use in the operation of the Business as
conducted since Seller's acquisition thereof;
(c) all rights under any patents, trademarks, service marks,
the Names, service names, copyrights, trade secrets, know-how,
inventions and other intellectual property rights, whether registered
or unregistered, and any applications therefor, and any and all other
intangible assets held for use in or necessary for the operation of the
Business as conducted since Seller's acquisition thereof;
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(d) the assets located in Seller's security products division
office in Dallas, Texas, or in the possession of or assigned to
personnel of the Business and held for use therein, as listed in
Schedule 2.1(d) (the "Fixed Assets");
(e) all rights or choses in action arising out of occurrences
before or after Closing Date, including without limitation all rights
under express or implied warranties relating to Business or the Assets;
and
(f) all information, files, records, data, plans and recorded
knowledge, including customer and supplier lists directly relating to
the Business or the Assets.
2.2 Assumed Liabilities. At the Closing, Purchaser shall assume and
hereafter in due course shall timely pay, discharge or perform (the "Assumed
Liabilities"):
(a) all obligations for future Product Returns and under
existing warranties to repair security products produced by Samsung and
sold by the Division since March 1998 and prior to the date hereof
under either the "GVI" or "Samsung" labels;
(b) all obligations for future Product Returns and under
existing warranties to repair security products sold by the Division
since March 1998 and prior to the date hereof other than under the
"GVI" or "Samsung" labels; and
(c) all obligations under the contracts listed in Schedule
2.2(c) to the extent that such obligations are required to be performed
after the Closing Date, were incurred in the ordinary course of
business and do not relate to any failure to perform, improper
performance or other breach by Seller prior to the end of the Closing
Date; provided, however, Purchaser shall not assume any obligation to
pay Commissions (as defined in Section 2.3(d)).
2.3 Excluded Liabilities. Except as expressly set forth in Section 2.2,
Purchaser does not, by virtue of its purchase of the Assets or otherwise, assume
or become responsible for any obligations or liabilities (the "Excluded
Liabilities") of Seller, including, without limitation:
(a) any product liability, warranty or similar claim for
damages or injury to person or property, any infringement of
intellectual property rights or any other liability, regardless of when
made or asserted, which arises out of or is based upon any express or
implied representation, warranty, agreement or guarantee made by
Seller, or alleged to have been made by Seller, or which is imposed or
asserted to be imposed by operation of law, in connection with any
service performed or product sold or leased by or on behalf of Seller
on or before the Closing Date, including, without limitation, any claim
relating to any product delivered in connection with the performance of
such service and any claim seeking recovery for consequential damages,
lost revenues or profits;
(b) any Tax (i) payable with respect to any period, whether
ending on or prior to the Closing Date or thereafter, or (ii) incident
to or arising as a consequence of the negotiation or consummation by
Seller or Affiliate thereof of this Agreement and the other Transaction
Documents and the transactions contemplated hereby and thereby;
(c) any liability or obligation under or in connection with
any assets used in the Business and not transferred to Purchaser
hereunder;
(d) other than in connection with Product Returns (as provided
above), any liability or obligation of any nature whatsoever for any
action, occurrence or omission arising on or prior to Closing Date,
whether such liability has been or is asserted before or after the
Closing Date, including, without limitation, commissions owed to any
sales representative or other agent of the Business in connection with
orders or sales of products or services on or prior to the Closing
Date, whether such commission is due to be paid on or after the Closing
Date (the "Commissions"); or
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(e) any liability or obligation of Seller arising or incurred
in connection with the negotiation, preparation and execution of this
Agreement and the transactions contemplated hereby, including, without
limitation, fees and expenses of counsel, accountants and other
experts.
2.4 The Purchase Price. In consideration of the sale, assignment,
transfer, conveyance and delivery to Purchaser of the Business and the Assets
and the performance of Seller's obligations and covenants hereunder, Purchaser
shall pay to Seller an amount (the "Purchase Price") equal to the sum of:
(a) 90% of the balances of Accounts Receivable outstanding as
of the Closing Date, together with the full amount of accounts in which
Purchaser or any affiliate thereof has an investment or management
interest prior to the date of this Agreement; and
(b) 75% of the net book value of the Fixed Assets as of the
Closing Date as mutually agreed by Purchaser and Seller.
2.5 Allocation of the Purchase Price. The Purchase Price shall be
allocated among the Assets as set forth on Schedule 2.5 hereto. Seller and
Purchaser shall prepare their respective federal, state and local tax returns
employing the allocation set forth on Schedule 2.5 and shall not take a position
on any income tax return, before any governmental agency charged with the
collection of any Tax, in any proceeding or otherwise that is inconsistent with
such allocation. Seller and Purchaser shall give prompt notice to each other of
the commencement of any tax audit or the assertion of any proposed deficiency or
adjustment by any taxing authority or agency which challenges such allocation.
2.6 Consent of Third Parties. Nothing in this Agreement shall be
construed as an attempt by Seller to assign to Purchaser pursuant to this
Agreement any Contract or Authorization included in the Assets which is by its
terms or by Regulation nonassignable without the consent of any other party or
parties, unless such consent or approval shall have been given, or as to which
all the remedies for the enforcement thereof available to Seller would not by
Regulation pass to Purchaser as an incident of the assignments provided for by
this Agreement (a "Non-Assignable Contract"). To the extent that any such
consent or approval in respect of, or a novation of, a Non-Assignable Contract
shall not have been obtained on or before the Closing Date, Seller shall
continue to use commercially reasonable efforts to obtain any such consent,
approval or novation after the Closing Date until such time as it shall have
been obtained, and Seller shall cooperate with Purchaser in any economically
feasible arrangement to provide that Purchaser shall receive Seller's benefits
under such Non-Assignable Contract, provided that Purchaser shall undertake to
pay or satisfy the corresponding liabilities under the terms of such
Non-Assignable Contract to the extent that Purchaser would have been responsible
therefor if such consent, approval or novation had been obtained.
2.7 Closing. The closing (the "Closing") of the sale and purchase of
the Assets (the "Acquisition") shall take place at 10:00 a.m, local time, on May
22, 2000, in Pittsburgh, Pennsylvania, or on such other date and place as may be
mutually agreed upon in writing by Purchaser and Seller. The date of the Closing
is sometimes herein referred to as the "Closing Date."
2.8 Items to be Delivered at Closing. At the Closing and subject to the
terms and conditions contained herein:
(a) Seller shall deliver to Purchaser the following:
(i) a bill of sale in the form attached hereto as
Exhibit A; and
(ii) such other documents or instruments of transfer,
conveyance and assignment as may be necessary or appropriate
to fully vest title to the Assets in Purchaser and carry out
the transactions contemplated hereby.
(b) Purchaser shall deliver to Seller the Purchase Price in
accordance with Section 2.4 hereof.
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(c) At or prior to the Closing, the parties hereto shall also
deliver to each other the agreements, certificates and other documents
and instruments referred to in Article VI hereof.
2.9 Names. Seller will terminate the use of any and all names and
d/b/a's currently or formerly used by it in connection with the Business
2.10 Further Assurances. Seller from time to time after the Closing
Date, at Purchaser's request, will execute, acknowledge and deliver to Purchaser
such other instruments of transfer, conveyance and assignment and will take such
other actions and execute and deliver such other documents, certifications and
further assurances as Purchaser may reasonably require in order to vest more
effectively in Purchaser, or to put Purchaser more fully in possession of, any
of the Assets, or to better enable Purchaser to complete, perform or discharge
any of the liabilities or obligations assumed by Purchaser on Closing Date
pursuant to Section 2.2 hereof.
2.11 Guaranty. Seller has guaranteed certain obligations of Purchaser
to Samsung (the "Guaranty"). In consideration of the Guaranty, Purchaser agrees,
so long as the Guaranty remains outstanding (not to exceed one year from the
Closing Date) or Seller is liable for any amounts under the Guaranty, to (i)
cause a nominee of Seller to be elected to the Board of Directors of Purchaser;
(ii) pay Seller a fee equal to one percent of Purchaser's purchases of products
from Samsung during such period (payable monthly within 15 days of the end of
each month); (iii) not, without Seller's consent, purchase in excess of $750,000
of products subject to the Guaranty in any single calendar month or merge or
consolidate with any entity or sell or dispose of all or substantially all of
its assets or issue additional shares of Purchaser constituting greater than 20%
of the then outstanding shares of Purchaser; and (iv) provide Seller copies of
all invoices of products purchased subject to the Guaranty.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that the statements
contained in this Article III are true and correct, except as set forth in the
disclosure schedule dated and delivered as of the date hereof by Seller to
Purchaser and attached to this Agreement (the "Seller Disclosure Schedule"). The
Seller Disclosure Schedule shall be arranged in paragraphs corresponding to, and
each exception to a representation and warranty set forth therein shall be
deemed to qualify, the specific numbered and lettered paragraph of this Article
III which is referenced in the applicable exception set forth on the Seller
Disclosure Schedule.
3.1 Corporate Existence. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. Seller is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction where the conduct of its business
by it requires it to be so qualified except where the failure to be so qualified
and to be in good standing would not have a Material Adverse Effect. The term
"Material Adverse Effect" means any change or effect that is or could be
expected to become materially adverse to the business, properties, assets,
condition (financial or otherwise), results of operations or prospects of the
Business.
3.2 Corporate Power; Authorization; Enforceable Obligations. Seller has
the corporate power, authority and legal right to execute, deliver and perform
this Agreement and the other agreements, documents and instruments required to
be delivered by Seller in accordance with the provisions hereof (the
"Transaction Documents"). The execution, delivery and performance of this
Agreement and the other Transaction Documents by Seller have been duly
authorized by the Board of Directors of Seller and no further corporate action
on the part of Seller is necessary to authorize this Agreement and the other
Transaction Documents and the performance of the transactions contemplated
hereby and thereby. This Agreement has been, and the other Transaction Documents
will be, duly executed and delivered on behalf of Seller by duly authorized
officers of Seller, and this Agreement constitutes, and the other Transaction
Documents, when executed and delivered, will constitute the legal, valid and
binding obligations of Seller, enforceable against it in accordance with their
respective terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
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affecting or relating to creditors rights generally and (b) the availability of
injunctive relief and other equitable remedies.
3.3 Validity of Contemplated Transactions. The execution, delivery and
performance of this Agreement and the other Transaction Documents by Seller do
not violate, conflict with or result in the breach of any term, condition or
provision of, or require the consent of any other Person under (a) any existing
law, ordinance, or governmental rule or regulation to which Seller is subject,
(b) any judgment, order, writ, injunction, decree or award of any Governmental
Entity which is applicable to Seller, (c) the charter documents of Seller or any
securities issued by Seller, or (d) any mortgage, indenture, agreement,
contract, commitment, lease, plan, Authorization, or other instrument, document
or understanding, oral or written, to which Seller is a party, by which Seller
may have rights or by which any of the Assets may be bound or affected, or give
any party with rights thereunder the right to terminate, modify, accelerate or
otherwise change the existing rights or obligations of Seller thereunder. Except
as aforesaid, no authorization, approval or consent of, and no registration or
filing with, any Governmental Entity is required in connection with the
execution, delivery or performance of this Agreement and the other Transaction
Documents by Seller. "Governmental Entity" means any federal, state, local,
national or supranational government or any court, administrative or regulatory
agency or commission or other governmental authority or agency, domestic or
foreign ("Governmental Entity")
3.4 No Third Party Options. There are no existing agreements, options,
commitments or rights with, of or to any person to acquire any Assets,
properties or rights included in the Assets or any interest therein or in the
Division or the Business, except for those contracts entered into in the normal
course of business consistent with past practice for the sale of inventory of
Seller.
3.5 Financial Statements. Attached hereto as Schedule 3.5 are financial
statements of the Business consisting of a balance sheet of the Business as of
March 31, 2000 and a statement of income and cash flow of the Business for the
three-month period ended March 31, 2000 (the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
period involved. The Financial Statements are based on the books and records of
Seller, and fairly present the financial condition of the Business in all
material respects as of the dates they were prepared and the results of the
operations of the Business for the period indicated. The balance sheet of Seller
as of March 31, 2000 is referred to herein as the "Balance Sheet" and the date
thereof as the "Balance Sheet Date."
3.6 Accounts Receivable. The Accounts Receivable of the Seller in
respect of the Business outstanding on the date hereof are valid and genuine;
have arisen solely out of bona fide sales and deliveries of goods, performance
of services and other business transactions in the ordinary course of business
consistent with past practice; and, to the knowledge of Seller, are not subject
to valid defenses, set-offs or counterclaims.
3.7 Taxes.
(a) All federal, state, local and foreign tax returns,
reports, statements and other similar filings required to be filed by
Seller (the "Tax Returns") in connection with the Business with respect
to any federal, state, local or foreign taxes, assessments, interest,
penalties, deficiencies, fees and other governmental charges or
impositions (including without limitation all income tax, unemployment
compensation, social security, payroll, sales and use, excise,
privilege, property, ad valorem, franchise, license, school and any
other tax or similar governmental charge or imposition under laws of
the United States or any state or municipal or political subdivision
thereof or any foreign country or political subdivision thereof) (the
"Taxes") have been timely filed with the appropriate governmental
agencies in all jurisdictions in which such Tax Returns are required to
be filed, and all such Tax Returns properly reflect the liabilities of
Seller for Taxes related to the Business for the periods, property or
events covered thereby.
(b) All Taxes, including without limitation those which are
called for by the Tax Returns, required to be paid, withheld or accrued
by Seller in respect of the Business and any deficiency assessments,
penalties and interest have been timely paid, withheld or accrued.
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(c) Seller has not received any written notice of assessment
or proposed assessment in connection with any Tax Returns and there are
not pending Tax examinations of or Tax claims asserted against Seller
in respect of the Assets or the Business. There are no Tax liens (other
than any lien for current Taxes not yet due and payable) on any of the
Assets nor, to the knowledge of Seller, are any such liens threatened
or pending on such Assets. Seller has no knowledge of any basis for any
additional assessment of any Taxes in connection with the Business.
(d) All Tax payments related to employees of the Business,
including income tax withholding, FICA, FUTA, unemployment and worker's
compensation, required to be made by Seller have been fully and
properly paid, withheld, accrued or recorded.
3.8 Absence of Undisclosed Liabilities. Seller has no liabilities or
obligations applicable or otherwise relating to the Business or the Assets,
either direct or indirect, matured or unmatured or absolute, contingent or
otherwise, and there is no existing condition, situation or set of circumstances
which would reasonably be expected to result in such liability, except (a) those
liabilities or obligations set forth on the Balance Sheet and not heretofore
paid or discharged, (b) liabilities arising in the ordinary course of Business,
and (c) those liabilities or obligations incurred, consistently with past
Business practice, in or as a result of the normal and ordinary course of
Business since the Balance Sheet Date and which are not in the aggregate
material in amount.
3.9 Title to Properties. Seller has good, valid and marketable title to
all of the Assets, including without limitation, all Assets reflected in the
Balance Sheet (except for inventory sold since the date thereof in the ordinary
course of business consistent with past practice) free and clear of all
mortgages, liens, pledges, security interests, charges, claims, restrictions and
other encumbrances and defects of title of any nature whatsoever ("Liens"),
except for (a) liens for current personal property taxes not yet due and
payable, (b) worker's, carrier's and materialman's liens, which, in the
aggregate are immaterial in amount, and (c) liens that are immaterial in
character, amount, and extent and which do not detract from the value or
interfere with the present or proposed use of the properties they affect
("Permitted Liens"). Except as set forth on Schedule 3.9, all the Assets owned
or used by Seller in connection with the Business are located at the Premises.
3.10 Condition of Tangible Assets. The tangible Assets are structurally
sound, are in good operating condition and repair, subject to normal wear and
maintenance, are usable in the regular and ordinary course of business and
conform to all applicable Regulations and Authorizations relating to their
construction, use and operation. No Person other than Seller owns, or has any
interest in, any of the Assets.
3.11 Compliance with Law; Authorizations.
(a) Seller has substantially complied with each, and is not in
violation of any, law, ordinance, code or governmental or regulatory
rule or regulation, whether federal, state, local or foreign, which
relate to the Assets or the Business ("Regulations"). Seller owns,
holds, possesses or lawfully uses in the operation of its business all
franchises, licenses, permits, easements, rights, applications,
filings, registrations, approvals and other authorizations
("Authorizations") which are in any manner necessary for it to conduct
the Business as now or previously conducted or for the ownership and
use of the assets owned or used by Seller or in the conduct of the
Business, free and clear of all Liens except Permitted Liens and in
compliance with all Regulations. Such Authorizations are valid and in
full force and effect and none of such Authorizations will be
terminated or impaired or become terminable as a result of the
transactions contemplated by this Agreement. All such Authorizations
are listed and described in the Seller Disclosure Schedule.
(b) Seller is not in default, nor has Seller received any
notice of any claim of default, with respect to any Authorization. All
Authorizations are renewable by their terms or in the ordinary course
of business without the need to comply with any special qualification
procedures or to pay any amounts other than routine filing fees. No
shareholder, director, officer, employee or former employee of any of
Seller or any affiliates of Seller, or any other Person owns or has any
proprietary, financial or other interest (direct or indirect) in any
Authorization which Seller owns, possesses or uses in the operation of
the Business of Seller as now or previously conducted.
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3.12 Absence of Certain Changes or Events. Since the Balance Sheet
Date, Seller has operated the Business only in the ordinary course and there has
not been:
(a) any event, act, occurrence or omission to act or occur
which has had a Material Adverse Effect on the Business or any event,
fact or condition of which Seller is aware that could be expected to
have a Material Adverse Effect on the Business and that has not been
disclosed in the Seller Disclosure Schedule; provided that Seller's
discontinuance of the Business shall not be deemed a Material Adverse
Effect for purposes of this Section 3.12(a);
(b) (i) any increase in or modification of the compensation or
benefits payable or to become payable by Seller to any employees of the
Business; (ii) any grant by Seller to any employee of the Business of
any increase in severance or termination pay, or (iii) any entry by
Seller into any employment, severance or termination agreement with any
employee of the Business;
(c) any sale (other than of finished goods inventory in the
ordinary course) of the property or assets of the Business individually
in excess of $10,000 or in the aggregate in excess of $50,000;
(d) any creation or assumption by Seller of any mortgage,
pledge, security interest or lien or other encumbrance on any Asset;
(e) any entry into, amendment of, relinquishment, termination
or nonrenewal by Seller of any contract, lease transaction, commitment
or other right or obligation applicable to the Business;
(f) any transfer, grant or loss by Seller (or to the knowledge
of Seller, diminution in value by any means) of a right under the
Seller Intellectual Property Rights other than those transferred or
granted in the ordinary course of business consistent with past
practice under existing agreements;
(g) any labor dispute, other than individual grievances, or
any activity or proceeding by a labor union or representative thereof
to organize any employees of the Business;
(h) any violation of or conflict with any applicable laws,
statutes, orders, rules and regulations promulgated or judgment entered
by any Governmental Entity which, individually or in the aggregate, has
had (or, insofar as Seller is aware, could be expected to have) a
Material Adverse Effect on the Business;
(i) any agreement or arrangement made by Seller to take any
action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Article III untrue or
incorrect as of the date when made;
(j) any damage, destruction or loss, whether or not covered by
insurance, that has had or could have a Material Adverse Effect on the
Business; or
(l) any agreement, whether or not in writing, to do any of the
foregoing.
3.13 Intellectual Property.
(a) Seller owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights, mask works, schematics, technology,
know-how, computer software programs or code and tangible or intangible
proprietary information or material and any applications for any
patents, trademarks, trade names, service marks, copyrights or other
proprietary rights, that are used in the Business (the "Seller
Intellectual Property Rights").
(b) The Seller Disclosure Schedule lists (i) all Seller
Intellectual Property Rights, (ii) all licenses, sublicenses and other
agreements as to which Seller is a party and pursuant to which any
person is
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authorized to use any Seller Intellectual Property Rights, and (iii)
all licenses, sublicenses and other agreements as to which Seller is a
party and pursuant to which Seller is authorized to use any third party
patents, trademarks, trade names, service marks, copyrights, mask
works, schematics, technology, know-how, computer software programs or
code and tangible or intangible proprietary information or material
("Seller Third Party Intellectual Property Rights") which are
incorporated in, are, or form a part of any product or service of
Seller in respect of the Business or the Assets.
(c) Seller is not, nor will it be as a result of the execution
and delivery of this Agreement and the other Transaction Documents or
the performance of Seller's obligations hereunder and thereunder, in
breach of any license, sublicense or other agreement relating to the
Seller Intellectual Property Rights or the Seller Third Party
Intellectual Property Rights.
(d) All patents, trademarks, service marks and copyrights
included in the Seller Intellectual Property Rights are valid and
subsisting. In connection with the Business and the Assets, Seller has
not infringed upon or unlawfully or wrongfully used any patent,
trademark, trade name, service mark, copyright, trade secret or other
intellectual property right owned or claimed by another. No action,
suit, proceeding or investigation has been instituted, or, to the
knowledge of Seller, threatened, relating to any, patent, trademark,
trade name, service mark, copyright, trade secret or other intellectual
property right formerly or currently used by Seller in connection with
the Business and the Assets. None of the Seller Intellectual Property
Rights is subject to any outstanding order, decree or judgment.
(e) Seller has taken all appropriate steps to protect and
preserve the confidentiality of all Seller Intellectual Property Rights
not otherwise protected by patents, patent applications or copyright
("Confidential Information"). All use, disclosure or appropriation of
Confidential Information by or to a third party has been pursuant to
the terms of a written agreement between Seller and such third party.
Seller has secured valid written assignments from all consultants and
employees who have contributed to the creation or development of the
Seller Intellectual Property Rights.
3.14 Year 2000 Compliance. All software products used in the Business
record, store, process and display calendar dates falling on or after January 1,
2000, in the same manner, and with the same functionality as such software
products record, store, process and display calendar dates falling on or before
December 31, 1999.
3.15 Agreements, Contracts and Commitments. The Seller Disclosure
Schedule sets forth an accurate, correct and complete list of all agreements,
contracts, commitments, arrangements and understandings, written or oral,
including all amendments and supplements thereto, to which Seller is a party or
is bound and which relate to, or are otherwise applicable to, the Business, or
by which any of the Assets are affected (collectively, the "Contracts"). To
Seller's knowledge, each of the Contracts is valid and enforceable against the
other party thereto in accordance with its terms. Seller is, and to the
knowledge of Seller, all other parties thereto are, in compliance with the
provisions thereof. Seller is, and to the knowledge of Seller, no other party
thereto is, in default in the performance, observance or fulfillment of any
material obligation, covenant or condition contained therein. No event has
occurred which with or without the giving of notice or lapse of time, or both,
would constitute a default thereunder. None of the rights of Seller under any
Contract will be impaired by the consummation of the transactions contemplated
hereby and the other Transaction Documents, and all such rights will be
enforceable by Purchaser after the Closing Date without the consent or agreement
of any other party. Seller has delivered accurate and complete copies of each
Contract to Purchaser. No Contract requires the consent of any party to its
assignment in connection with the transactions contemplated hereby and the other
Transaction Documents.
3.16 Litigation. There is no action, suit or proceeding, claim,
arbitration, litigation or investigation ("Action"), against Seller pending in
respect of the Business or the Assets or as to which Seller has received any
written notice of assertion, or, to the knowledge of Seller, threatened. There
is no unsatisfied judgment, penalty or award against or affecting the Business
or the Assets, and there is no award, injunction, judgment, order, ruling,
subpoena or verdict of other decision entered, issued or rendered by any
Governmental Entity to which the Business or any of the Assets are subject.
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3.17 Employees.
(a) The Seller Disclosure Schedule sets forth the following:
(i) a list of all employees of the Business (including name, title and
position); (ii) each such employee's length of service; and (iii) the
compensation (including terms of payment, bonuses, commissions and
deferred compensation, as well as any benefits) of each such employee.
(b) With respect to the Business, (i) there have not been in
the past five years and, to Seller's knowledge, there are not pending,
any labor disputes, work stoppages, requests for representation,
pickets, work slow-downs due to labor disagreements or any actions or
arbitrations which involve the labor or employment relations of Seller;
(ii) there are and have been no unresolved violations of any
Regulations of any Governmental Entity respecting the employment or
benefits of any employees; (iii) there is no unfair labor practice,
charge or complaint pending, unresolved or, to the knowledge of Seller,
threatened before the National Labor Relations Board; (iv) the
employees of Seller are not covered by any collective bargaining
agreement; (v) Seller is not a party to any agreement which restricts
Seller from relocating, closing or terminating any of its operations or
facilities or any portion thereof; (vi) Seller has provided or will
timely provide prior to Closing all notices required by law to be given
prior to Closing to all local, state, federal or national labor,
wage-payment, equal employment opportunity, unemployment insurance and
related agencies; (vii) Seller has paid or properly accrued in the
ordinary course of business all wages and compensation due to
employees, including all vacations or vacation pay, holidays or holiday
pay, sick days or sick pay, and bonuses; (viii) the transactions
contemplated by this Agreement will not create liability under any
Regulations of any Governmental Entity respecting reductions in force
or the impact on employees on plant closing or sales of businesses; and
(ix) all employees of Seller are legally able to work in the United
States.
3.18 Employee Benefit Plans and Arrangements.
(a) Except as set forth in the Seller Disclosure Schedule,
with respect to the Business, Seller is not, and has not previously
been, a party to (1) any "employee benefit plan" as defined in Section
3(3) of ERISA ("Plan"), or (2) any formal or informal deferred
compensation, bonus, performance compensation, stock purchase, stock
option, stock appreciation, severance, vacation, sick leave, holiday
pay, fringe benefits, personnel policy, reimbursement program,
incentive, insurance, welfare or similar plan, program, policy or
arrangement ("Benefit Plan"). A current, accurate and complete copy of
each such Plan and each Benefit Plan has been made available to
Purchaser. With respect to Plans and Benefit Plans applicable or
otherwise relating to the Business:
(b) Each Plan and Benefit Plan is in substantial compliance
with all reporting, disclosure and other requirements of ERISA and the
Code and any other law applicable to such Plan or Benefit Plan. No Plan
is a "defined benefit plan" as defined in Section 3(35) of ERISA. With
respect to each Plan and Benefit Plan, there are no actions, suits or
claims (other than routine claims for benefits in the ordinary course)
pending or, to the best knowledge of Seller, threatened against any
Plan or Benefit Plan, Seller or any trustee or agent of any Plan or
Benefit Plan.
(c) Seller is not in default in performing any of its
contractual obligations under any of the Plans or Benefit Plans or any
related trust agreement or insurance contract.
(d) There are no material outstanding liabilities of any Plan
or Benefit Plan other than liabilities for benefits to be paid to
participants in such Plan or Benefit Plan and their beneficiaries in
accordance with the terms of such Plan or Benefit Plan.
(e) The consummation of the transactions contemplated by this
Agreement will not (in and of itself) (i) entitle any employee of
Seller to severance pay, unemployment compensation or any other
payment; (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due to any such employee; or (iii) result in
any prohibited transaction described in Section 406 of ERISA or Section
4975 of the Code for which an exemption is not available.
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3.19 Environmental and Health/Safety Matters. Seller is, and has at all
times operated the Business, in substantial compliance with all applicable
environmental laws. Seller has obtained, maintained and complied with all
environmental permits required for the operation of the Business and such
permits will continue to remain in effect without any change to their respective
terms and conditions after the transactions contemplated by this Agreement. No
hazardous substances have been generated, transported, stored, treated, recycled
or otherwise handled in any way by Seller in the operation of the Business. No
hazardous substances are located on, contained in or otherwise form a part of
the Assets. Seller has not received any notice from any Governmental Entity or
other Person advising that it is potentially responsible for response costs with
respect to a release or threatened release of hazardous substances in connection
with the Business. To the knowledge of Seller, no underground storage tanks or
hazardous substances are or ever were located on property currently or formerly
owned or operated by Seller in connection with the Business. No Order,
litigation, settlement or citation with respect to hazardous substances exists
with respect to Seller in connection with the operation of Business.
3.20 Insurance. The Assets and operations of the Business are insured
under various policies of general liability and other forms of insurance. All
such policies are in full force and effect in accordance with their terms, no
notice of cancellation has been received, and there is no existing default or
event which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. Such policies are in amounts which are adequate
in relation to the Business and Assets and all premiums due to date have been
paid in full.
3.21 Conditions Affecting Seller. Seller has no reason to believe that
any loss of any employee, agent, customer or supplier or other advantageous
arrangement will result because of the consummation of the transactions
contemplated hereby.
3.22 Product Design; Warranties.
(a) Except as disclosed in the Seller Disclosure Schedule,
with respect to the Business, (i) Seller has not agreed to become, and
is not otherwise responsible for, consequential damages, and (ii) there
are no warranties (express or implied) outstanding with respect to any
products ("Products") currently or formerly created, manufactured,
sold, distributed or licensed, or any services rendered, by Seller.
(b) There are no pending actions, suits, proceedings,
hearings, investigations, charges, complaints, claims or demands
against Seller with respect to the Business arising out of any injury
to individuals or property as a result of the ownership, possession, or
use of any Product manufactured, sold, leased, or delivered by Seller
and, to the Company's knowledge, there is no basis for any present or
future actions, suits, proceedings, hearings, investigations, charges,
complaints, claims or demands giving rise to any liability.
3.23 Completeness of Disclosure. No representation or warranty by
Seller in this Agreement nor any certificate, schedule, statement, document or
instrument furnished or to be furnished to Purchaser pursuant hereto, or in
connection with the negotiation, execution or performance of this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated herein or therein or
necessary to make any statement herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that the statements
contained in this Article IV are true and correct, except as set forth in the
disclosure schedule dated and delivered as of the date hereof by Purchaser to
Seller and attached to this Agreement (the "Purchaser Disclosure Schedule"). The
Purchaser Disclosure Schedule shall be arranged in paragraphs corresponding to,
and each exception to a representation and warranty set forth therein shall be
deemed to qualify, the specific numbered and lettered paragraph of this Article
IV which is referenced in the applicable exception set forth on the Purchaser
Disclosure Schedule.
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4.1 Organization and Standing. Purchaser is a limited liability company
duly organized and existing under, and by virtue of, the laws of the State of
Texas and is in good standing under such laws.
4.2 Authorization. Purchaser has the requisite legal power and
authority to enter into this Agreement and the other Transaction Documents and
to perform its obligations hereunder and thereunder. The execution and delivery
of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby and thereby have been duly authorized by the
Managers of Purchaser and no other proceedings on the part of Purchaser are
necessary to authorize this Agreement and the transactions contemplated hereby
and thereby. This Agreement has been, and the other Transaction Documents will
be, duly executed and delivered by Purchaser and this Agreement constitutes, and
the other Transaction Documents, when executed and delivered, will constitute
valid and binding obligations of Purchaser, enforceable against Purchaser in
accordance with their respective terms, except as such enforceability may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to creditors rights generally and (b) the
availability of injunctive relief and other equitable remedies.
4.3 Compliance with Other Instruments. The execution, delivery and
performance of this Agreement and the other Transaction Documents by Purchaser
does not and will not violate, conflict with or result in the breach of any
term, condition or provision of (a) any law, ordinance, or governmental rule or
regulation to which Purchaser is subject, (b) any judgment, order, writ,
injunction, decree or award of any Governmental Entity which is applicable to
Purchaser, or (c) the charter documents of Purchaser or any securities issued by
Purchaser. Except as aforesaid, no authorization, approval or consent of, and no
registration or filing with, any Governmental Entity is required in connection
with the execution, delivery or performance of this Agreement and the other
Transaction Documents by Purchaser.
ARTICLE V
COVENANTS OF THE PARTIES PENDING CLOSING
The respective parties hereto agree to take the following actions
between the date hereof and the Closing Date:
5.1 Conduct of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Closing, except with the prior consent of Purchaser, Seller shall:
(a) maintain its corporate existence and carry on the Business
in the usual, regular and ordinary course in a manner consistent with
past practice and in accordance with the provisions of the Agreement;
(b) use all reasonable efforts consistent with past practices
and policies to preserve intact its present Business organization and
relationships to the end that the goodwill and ongoing Business be
substantially unimpaired at the Closing;
(c) maintain the Assets in the same state of repair, order and
conditions as they are on the date hereof, reasonable wear and tear
excepted;
(d) maintain the books and records of the Business in
accordance with past practice, and to use commercially reasonable
efforts to maintain in full force and effect all Authorizations and
insurance policies applicable or otherwise relating to the Business;
and
(e) promptly notify Purchaser of any event or occurrence not
in the ordinary course of Business.
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5.2 Negative Covenants. Except as expressly provided in this Agreement
in connection with the Business, Seller shall not, without the prior written
consent of Purchaser:
(a) sell, assign, transfer, lease, consume or otherwise
dispose of any property or assets used or held for use in the Business
except in the ordinary course of Business consistent with past
practice;
(b) amend, modify, cancel or waive any rights under any
Contract or enter into any agreement, contract, commitment, arrangement
or understanding, written or oral, which relates to, or is otherwise
applicable to, the Business, or by which any of the Assets is affected;
(c) mortgage, pledge or subject to Liens any of the Assets;
(d) cancel, compromise or waive any debts owed to it
applicable or otherwise relating to the Business;
(e) knowingly do any act or omit to do any act within its
reasonable control which will cause it to breach any representation,
warranty or obligation contained in this Agreement;
(f) increase the wages, salaries, compensation, pension or
other benefits payable to any former employee or any current employee
of the Business, or pay any bonus or other amount to any such former or
current employee;
(g) take any actions outside the ordinary course of business;
or
(h) agree to do any of the foregoing, except as contemplated
by this Agreement.
5.3 Access. Seller shall give to Purchaser's employees and
representatives reasonable access to and the right to inspect, during normal
business hours, all of the premises, properties, assets, records, contracts and
other documents relating to the Business for the purpose of making such
investigation of the Business as Purchaser shall desire to make, provided that
such investigation shall not unreasonably interfere with Seller's normal
business operations.
ARTICLE VI
CONDITIONS TO PURCHASE AND SALE
6.1 Conditions to Each Party's Obligations. The obligation of Purchaser
and Seller to consummate the transactions hereunder shall be subject to the
satisfaction of the condition that no Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, temporary restraining order,
preliminary or permanent injunction or other legal restraint or prohibition
which is in effect on the Closing Date and prohibits the consummation of the
Acquisition, or which limits or restricts Purchaser's conduct or operation of
the Business following the Acquisition.
6.2 Conditions to Obligation of Purchaser. The obligation of Purchaser
to consummate the transactions contemplated by this Agreement will be subject to
the satisfaction, on or before the Closing Date, of each of the following
conditions unless waived in writing by Purchaser:
(a) Representations and Warranties of Seller. Each of the
representations and warranties of Seller set forth in this Agreement
that is qualified by materiality shall be true and correct at and as of
the Closing Date as if made at and as of the Closing Date and each of
such representations and warranties that is not so qualified shall be
true and correct in all material respects at and as of the Closing Date
as if made at and as of the Closing Date, and Purchaser shall have
received a certificate signed on behalf of Seller by the President or
Chief Financial Officer of Seller to such effect.
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(b) Performance of Obligations of Seller. Seller shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date,
and Purchaser shall have received a certificate signed on behalf of
Seller by the President or Chief Financial Officer of Seller to such
effect.
(c) No Material Adverse Change. Since the Balance Sheet Date,
the Business shall not have suffered a Material Adverse Effect.
(d) Bills of Sale. Seller shall have delivered to Purchaser
bills of sale and other good and sufficient instruments of transfer as
Purchaser deems reasonably necessary and appropriate to vest in
Purchaser all of Seller's right, title and interest in and to the
Assets.
(e) Authorizations, Approvals and Consents. All
authorizations, approvals or consents of any and all Governmental
Entities or other Persons required to be obtained by Seller to
consummate the transactions contemplated by this Agreement including
without limitation, the authorizations, approvals, or consents listed
on the Seller Disclosure Schedule, shall have been validly obtained and
copies thereof shall have been delivered to Purchaser.
(f) Corporate Action. Seller shall have taken all corporate
action necessary to approve the transactions contemplated by the
Agreement and the other Transaction Documents, and Seller shall have
furnished Purchaser with copies of resolutions, adopted by the Board of
Directors of Seller and certified by the secretary of Seller as of the
Closing Date, in form and substance reasonably satisfactory to counsel
for Purchaser, in connection with such transactions.
(g) Liens and Indebtedness. The Assets shall be free and clear
of all mortgages, liens, pledges, security interests, charges, claims,
restrictions and other encumbrances and defects of title of any nature
whatsoever except for Permitted Liens and termination statements or
other evidence reasonably satisfactory to Purchaser of the discharge of
any indebtedness relating to the Assets shall have been filed in all
applicable jurisdictions. Purchaser shall have received evidence
satisfactory to it of the discharge of all such indebtedness.
(h) Inventory Transfer Agreement. Seller, Purchaser and
Samsung shall have entered into the Inventory Transfer Agreement
substantially in the form attached hereto as Exhibit B.
(i) Distribution Agreement. Purchaser and Samsung shall have
entered into the Distribution Agreement in substantially the form
attached hereto as Exhibit C.
(j) Financing. Purchaser shall have secured financing on terms
satisfactory to Purchaser in its discretion that will enable it to
consummate the transactions contemplated by this Agreement and the
other Transaction Documents and provide adequate working capital.
(k) Employees. Thomas Wade shall have entered into an
employment agreement with Purchaser satisfactory to Purchaser in its
sole discretion.
6.3 Conditions to Obligations of Seller. The obligation of Seller to
consummate the transactions contemplated by this Agreement will be subject to
the satisfaction, on or before the Closing Date, of each of the following
conditions unless waived in writing by Seller:
(a) Representations and Warranties. Each of the
representations and warranties of Purchaser set forth in this Agreement
that is qualified by materiality shall be true and correct at and as of
the Closing Date as if made at and as of the Closing Date and each of
such representations and warranties that is not so qualified shall be
true and correct in all material respects at and as of the Closing Date
as if made at and as of the Closing Date, and Seller shall have
received a certificate signed on behalf of Parent by the President of
Purchaser to such effect.
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(b) Performance Of Obligations of Purchaser. Purchaser shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date,
and Seller shall have received a certificate signed on behalf of Parent
by the by the President of Purchaser to such effect.
(c) Corporate Action. Purchaser shall have taken all action
necessary to approve the transactions contemplated by this Agreement,
and Purchaser shall have furnished Seller with copies of resolutions,
adopted by its Managers and certified by its secretary as of the
Closing Date, in form and substance reasonably satisfactory to counsel
for Seller, in connection with such transactions.
ARTICLE VII
POST-CLOSING COVENANTS
7.1 Maintenance of Books and Records. Seller shall preserve until the
sixth anniversary of the Closing Date all records possessed by it relating to
any of the Assets or to the Business prior to the Closing Date. After the
Closing Date, as may be necessary or useful in connection with Purchaser's
operation of the Business, Seller shall provide Purchaser with access, upon
prior reasonable written request, during regular business hours, to (i) the
officers and employees of Seller and (ii) the books of account and records of
Seller, and Purchaser and its representatives shall have the right to make
copies of such books and records; provided, however, that the foregoing right of
access shall not be exercisable in such a manner as to interfere unreasonably
with the normal operations and business of Seller.
7.2 Restrictive Covenants.
(a) In order to protect the value and goodwill of the Business
and the Assets, Seller covenants that for the period commencing on the
Closing Date and ending on the fifth anniversary thereof (the
"Noncompetition Period"), Seller shall not engage in, directly or
indirectly, in any capacity, or have any direct or indirect ownership
interest in, or permit Seller's name to be used in connection with, any
business, anywhere in the United States, which is engaged in the
marketing, distribution and sale of video security and surveillance
products (the "Restricted Business"), unless Seller reacquires the
Restricted Business from Purchaser. It is recognized by Seller that the
Restricted Business is expected to be conducted throughout the United
States and that more narrow geographical limitations of any nature on
this noncompetition covenant (and the nonsolicitation covenant set
forth in Section 7.2(b)) are therefore not appropriate. The foregoing
restriction shall not be construed to prohibit the ownership by Seller
as a passive investment of not more than two percent (2%) of any class
of securities of any corporation which is engaged in any of the
foregoing businesses having a class of securities registered pursuant
to Section 12 of the Securities Exchange Act of 1934, as amended.
(b) Seller covenants that during the Noncompetition Period,
Seller will not, either directly or indirectly, (i) call on or solicit
any customer or prospective customer of Purchaser for the purpose of
providing services or products in the Restricted Business, or (ii)
solicit the employment or engagement of services of any person who is
or was employed as an employee, consultant or independent contractor by
Purchaser during such period or during the two years preceding the
commencement of such period on a full-or part-time basis.
(c) Seller recognizes and acknowledges that by reason of its
ownership of the Business it has had access to confidential and
proprietary information relating to the Restricted Business. Seller
acknowledges that such confidential and proprietary information is a
valuable and unique asset of the Business and covenants that it will
not disclose any such confidential or proprietary information after the
Closing Date to any person for any reason whatsoever, unless Seller can
show that such information (a) is in the public domain through no
wrongful act of Seller, (b) has been rightfully received from a third
party without restriction and without breach of this Agreement, or (c)
is required by law so to be disclosed
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(provided that Seller shall have given Purchaser notice of such
requirement and full opportunity to contest such disclosure).
(d) Seller acknowledges that the restrictions contained in
this Section 7.2 are reasonable and necessary to protect the legitimate
interests of Purchaser and constitute a material inducement to
Purchaser to enter into this Agreement and consummate the purchase of
the Business and the Assets. Seller acknowledges that any violation of
this Section 7.2 will result in irreparable injury to Purchaser and
agrees that Purchaser shall be entitled to preliminary and permanent
injunctive relief, without the necessity of proving actual damages, as
well as an equitable accounting of all earnings, profits and other
benefits arising from any violation of this Section 7.2, which rights
shall be cumulative and in addition to any other rights or remedies to
which Purchaser may be entitled. The Noncompetition Period shall be
extended by any period during which Seller is in breach of its
obligations under this Section 7.2.
(e) In the event that any covenant contained in this Section
7.2 should ever be adjudicated to exceed the time, geographic, product
or service, or other limitations permitted by applicable law in any
jurisdiction, then any court is expressly empowered to reform such
covenant, and such covenant shall be deemed reformed, in such
jurisdiction to the maximum time, geographic, product or service, or
other limitations permitted by applicable law. The covenants contained
in this Section 7.2 and each provision thereof are severable and
distinct covenants and provisions. The invalidity or unenforceability
of any such covenant or provision as written shall not invalidate or
render unenforceable the remaining covenants or provisions hereof, and
any such invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such covenant or provision in any
other jurisdiction.
7.3 Discharge of Business Obligations. From and after the Closing Date,
Seller shall pay and discharge, in accordance with past practice but not less
than on a timely basis, all obligations and liabilities incurred prior to the
Closing Date in respect of the Business, its operations or the assets and
properties used therein (except for Assumed Liabilities).
7.4 Payments Received. Seller agrees that after the Closing Date it
will hold and will promptly, but in no event later than two business days,
transfer to Purchaser, from time to time as and when received by it, any cash,
checks with appropriate endorsements (using its best efforts not to convert such
checks into cash), or other property that it may receive on or after the Closing
Date which properly belongs to Purchaser and will account to Purchaser for all
such receipts. Seller will provide any cooperation reasonably requested by
Purchaser to facilitate the collection of the Accounts Receivable as and when
due, including, without limitation, instructing customers to send payment to any
address or lockbox designated by Purchaser.
7.5 Bulk Transfer Laws. Purchaser and Seller hereby waive compliance by
Purchaser and Seller with the bulk sales law and any other similar laws in any
applicable jurisdiction in respect of the transactions contemplated by this
Agreement and the other Transaction Documents. Seller shall indemnify Purchaser
from, and hold it harmless against, any liabilities, damages, costs and expenses
resulting from or arising out of (a) the parties' failure to comply with any of
such laws in respect of the transactions contemplated by this Agreement, or (b)
any action brought or levy made as a result thereof, other than those
liabilities which have been expressly assumed, on such terms as expressly
assumed, by Purchaser pursuant to this Agreement.
7.6 License Grant. To the extent Seller owns or is entitled to grant
such right, Seller hereby grants to Purchaser an exclusive world-wide
irrevocable royalty-free license to use the mark "GVI" (the "Mark"), either
alone or in combination with any other mark, logo, symbol, name and/or domain
name, as Purchaser's trade name, trademark, service mark, logo, symbol and/or
domain name, in connection with the manufacture, sale, marketing and
distribution of security and surveillance products and the provision of related
services (the "Field"), and to sublicense the Mark in connection therewith.
Seller agrees that Purchaser shall have the right to register the Mark, either
alone or in combination with any other mark, logo, symbol, name and/or domain
name, for use in the Field. Seller agrees that this license may be transferred
by Purchaser in connection with any acquisition of Purchaser, whether by way of
share exchange, merger, consolidation or sale of all or substantially all of
Purchaser's assets or membership units or in connection with any sale by
Purchaser of the Business.
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ARTICLE VIII
EMPLOYEES
8.1 Offer of Employment. On the Closing Date, Purchaser will offer
employment to those employees of Seller set forth on Schedule 8.1. The terms and
conditions of any offer of employment will be determined by Purchaser in its
sole discretion. Any and all liabilities or expenses relating to or arising out
of the employment, or cessation of employment, of any employee or former
employee of Seller on or prior to close of business on the Closing Date shall be
the sole responsibility of Seller.
8.2 Employee Benefits. From and after the Closing Date, Purchaser shall
offer such employee benefit plans and arrangements as it deems appropriate in
its sole discretion. Purchaser shall not assume as of the Closing Date any
liability or obligation under any of the Plans or Benefit Plans.
8.3 COBRA Obligations. Seller shall retain all liabilities, perform all
obligations and maintain all insurance under the Consolidated Omnibus Budget
Reconciliation act of 1985 ("COBRA") with respect to its employees and former
employees of the Business and their covered dependents; provided, that Purchaser
shall perform all of its obligations under COBRA with respect to Transferred
Employees that become covered by any group health insurance plan of Purchaser.
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ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated at any time by either
party prior to the Closing by written notice by the terminating party to the
other party.
9.2 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors or Managers,
at any time before or after approval of the matters presented in connection with
transactions contemplated hereby. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
9.3 Waiver. At any time prior to the Closing, Purchaser may waive
compliance by Seller, and Seller may waive compliance by Purchaser, by an
instrument in writing signed by or on behalf of the party waiving compliance,
with any term or provision of this Agreement that the other party was or is
obligated to comply with or perform.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by Seller. Seller shall indemnify and defend
Purchaser and its Affiliates, officers, directors and employees (collectively,
the "Purchaser Indemnified Parties") against, and shall hold them harmless from,
any loss, liability of every type and nature (whether known or unknown, fixed or
contingent), claim, including, without limitation, any third-party claim,
charge, action, suit, proceeding, assessed interest, penalty, damage, Tax or
expense (including legal and other professional fees and expenses)
(collectively, "Losses") resulting from, arising out of, or incurred by any
Purchaser Indemnified Party in connection with, or otherwise with respect to the
matters set forth in 10.1(a), (b) and (c) below; provided, however, that Seller
shall not be obligated to indemnify the Purchaser Indemnified Parties until, and
only to the extent that, the aggregate amount of all Losses exceeds $25,000;
provided, further, that the maximum aggregate liability of Seller for
indemnification pursuant to Section 10.1(a) shall not exceed the Purchase Price:
(a) any breach or failure of a representation or warranty by
Seller contained in this Agreement, the other Transaction Documents or
any Schedule or other agreements, instruments, or certificates to be
executed and delivered pursuant hereto or thereto;
(b) any breach of any covenant of Seller contained in this
Agreement, the other Transaction Documents or any Schedule or other
agreements, instruments or certificates to be executed and delivered
pursuant hereto or thereto; and
(c) the failure of Seller to pay or otherwise discharge when
due and payable any liabilities of Seller and the Business other than
the Assumed Liabilities.
10.2 Indemnification by Purchaser. Purchaser shall indemnify and defend
Seller against, and shall hold it harmless from, any Losses resulting from,
arising out of, or incurred by Seller in connection with, or otherwise with
respect to the matters set forth in 10.2(a), (b) and (c) below; provided,
however, that the maximum aggregate liability of Purchaser for any such
indemnification pursuant to Section 10.2(a) shall not exceed the Purchase Price:
(a) any breach or failure of a representation or warranty by
Purchaser contained in this Agreement, the other Transaction Documents
or any Schedule or other agreements, instruments, schedules or
certificates to be executed and delivered pursuant hereto or thereto;
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(b) any breach of any covenant of Purchaser contained in this
Agreement, the Transaction Documents or any Schedule or other
agreements, instruments, schedules or certificates to be executed and
delivered pursuant hereto or thereto; and
(c) the failure of Purchaser to pay or otherwise discharge
when due and payable any of the Assumed Liabilities
10.3 Survival. The representations and warranties and covenants of
Seller and Purchaser contained in this Agreement shall survive Closing Date for
a period of two years following the Closing Date, except that the covenants set
forth in Article VII shall survive for the applicable periods set forth therein.
In the event that notice of any claim for indemnification shall have been given
within the applicable survival period, the representations and warranties and
covenants that are the subject of such indemnification claim shall survive until
such claim is finally resolved.
10.4 Notice of Claims. Any party entitled to indemnification under this
Article X (the "Indemnitee") shall notify the party obligated to provide such
indemnification (the "Indemnitor") in writing of any claim, which the Indemnitee
shall have determined has given or could give rise to a claim for
indemnification under this Article X ("Notice of Claim").
10.5 Third Party Claims.
(a) If the facts giving rise to any indemnification provided
for in this Agreement involve any actual or threatened claim or demand
by any third party ("Third Party Claim") against any Indemnitee, the
Indemnitee shall give prompt written notice of such Third Party Claim
to the Indemnitor. Failure or delay in notifying the Indemnitor will
not relieve the Indemnitor of any liability it may have to the
Indemnitee, except to the extent that such failure or delay causes
actual harm to the Indemnitor with respect to such claim.
(b) The Indemnitor will be entitled, upon its election, by
written notice given to the Indemnitee within thirty (30) days after
the date on which the Indemnitee has given notice of such Third Party
Claim to the Indemnitor (without prejudice to the right of such
Indemnitee to participate at its expense through counsel of its own
choosing), to assume the defense or prosecution of such claim and any
litigation resulting therefrom (a "Third Party Defense") at its expense
and through counsel of its own choosing reasonably acceptable to the
Indemnitee; provided, however, that the Indemnitor shall not have the
right to assume the Third Party Defense (i) if any such claim seeks, in
addition to or in lieu of monetary damages, any injunctive or other
equitable relief, or (ii) if, in the reasonable opinion of the
Indemnitee and its counsel, there is or could reasonably be expected to
be a conflict of interest between the position of the Indemnitor and
the Indemnitee, or (iii) the Indemnitor fails to provide reasonable
assurance to the Indemnitee of its financial capacity to defend such
proceeding and provide indemnification with respect to such proceeding,
and provided further, that if, by reason of the claim of such third
party a lien, attachment, garnishment or execution is placed upon any
of the property or assets of such Indemnitee, the Indemnitor, if it
desires to exercise its right to assume such Third Party Defense, must
furnish a satisfactory indemnity bond to obtain the prompt release of
such lien, attachment, garnishment or execution. If the Indemnitor
assumes a Third Party Defense, it will take all steps necessary in the
defense, prosecution, or settlement of such claim or litigation and
will hold all Indemnitees harmless from and against all Losses caused
by or arising out of any settlement thereof (other than such
Indemnitee's expenses of participation in such defense, prosecution or
settlement). No Indemnitor will, in a Third Party Defense, except with
the written consent of the Indemnitee to which such Indemnitor is
obligated to furnish indemnification pursuant to this Agreement,
consent to the entry of any judgment or enter into any settlement (i)
which does not include as an unconditional term thereof the giving to
the Indemnitee by the third party of a release from all liability in
respect of such suit, claim, action, or proceeding, (ii) unless there
is no finding or admission of any violation of law by the Indemnitee
(or any affiliate thereof) or any violation of the rights of any Person
and no effect on any other claims that may be made against the
Indemnitee, or (iii) which imposes any form of relief other than
monetary damages.
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(c) If the Indemnitor does not assume a Third Party Defense,
the Indemnitee may, at the expense of the Indemnitor, defend or
prosecute such claim or litigation in such manner as it may deem
appropriate and may settle such claim or litigation after giving
written notice thereof to the Indemnitor, on such terms as such
Indemnitee may deem appropriate and the Indemnitor will promptly
reimburse such Indemnitee for any Losses incurred in connection with
such settlement. If no settlement of such claim or litigation is made,
the Indemnitor will promptly reimburse such Indemnitee for any Losses
arising out of any judgment rendered with respect to such claim or
litigation. Any Losses for which an Indemnitee is entitled to
indemnification hereunder shall be promptly paid as incurred. If the
Indemnitor does not elect to assume a Third Party Defense which it has
the right to assume hereunder, the Indemnitee shall have no obligation
to do so.
10.6 Effect of Investigation; Waiver.
(a) Any party's right to indemnification or other remedies
based upon the representations and warranties, covenants, agreements
and undertakings of the other party will not be affected by any
investigation, knowledge or waiver of any condition of such party. Such
representations and warranties shall not be affected or deemed waived
by reason of the fact that Purchaser knew or should have known that any
of the same is or might be inaccurate. Any investigation by such party
shall be for its own protection only and shall not affect or impair any
right or remedy hereunder.
(b) The waiver by Purchaser of any condition based on the
accuracy of any representation or warranty, or compliance with any
covenant or obligation, will not affect any right to indemnification or
other remedy based on such warranties, covenants and obligations.
10.7 Resolution of Disputes.
(a) Any dispute, controversy or claim arising out of or
relating to this Agreement, the other Transaction Documents or any
contract or agreement entered into pursuant hereto or thereto or the
performance by the parties of its or their terms shall be settled by
binding arbitration held in Chicago, Illinois in accordance with the
Commercial Arbitration rules of the American Arbitration Association
then in effect, except as specifically otherwise provided in this
Section. The arbitrators shall be selected from a group of
professionals associated with JAMS/Endispute.
(b) The panel arbitration to be appointed shall consist of
three neutral arbitrators. The parties shall each select one
arbitrator, and the arbitrators so selected shall select the third
arbitrator.
(c) The arbitrators shall allow such discovery as the
arbitrators determine appropriate under the circumstances, including
without limitation, the right to request production of documents and to
take such depositions of fact and experts as reasonably appropriate to
establish the parties' respective positions. Such discovery shall be
concluded within ninety (90) days following selection of the
arbitrators unless the arbitrators determine that fairness and justice
would require a longer time period. The arbitrators shall resolve the
dispute as expeditiously as practicable, and if reasonably practicable,
within one hundred twenty (120) days after the selection of the
arbitrators. The arbitrators shall give the parties written notice of
the decision, with the reasons therefor set out, and shall have thirty
(30) days thereafter to reconsider and modify such decision if any
party so requests within ten (10) days after the decision. Thereafter,
the decision of the arbitrators shall be final, binding, and
nonappealable with respect to all persons, including (without
limitation) persons who have failed or refused to participate in the
arbitration process.
(d) The arbitrators shall have the authority to award relief
under legal or equitable principles, including interim or preliminary
relief, and to allocate responsibility for the costs of the arbitration
and to award recovery of attorney's fees and expenses in such manner as
is determined to be appropriate by the arbitrators.
(e) Judgment upon the award rendered by the arbitrators may be
entered in any court having personal and subject matter jurisdiction.
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(f) All proceedings under this Section, and all evidence given
or discovered pursuant hereto, shall be maintained in confidence by all
parties.
(g) The fact that the dispute resolution procedures specified
in this Section shall have been or may be invoked shall not excuse any
party from performing its obligations under this Agreement and during
the pendency of any such procedure all parties shall continue to
perform their respective obligations in good faith, subject to any
rights to terminate this Agreement that may be available to any party.
(h) The arbitration procedure in this Section 10.7 shall be
the exclusive means available to Purchaser and Seller to resolve any
claim, controversy or dispute arising hereunder.
ARTICLE XI
MISCELLANEOUS
11.1 Sales, Transfer and Documentary Taxes, etc. Seller shall pay all
federal, state and local sales and documentary and other transfer taxes, if any,
due as a result of the purchase, sale or transfer of the Assets in accordance
herewith and Seller shall indemnify, reimburse and hold harmless Purchaser in
respect of the liability for payment of or failure to pay any such taxes or the
filing of or failure to file any reports required in connection therewith.
11.2 Expenses. Each party hereto shall pay its own expenses incidental
to the preparation of this Agreement and the other Transaction Documents, the
carrying out of the provisions of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby.
11.3 Contents of Agreement. This Agreement and the other Transaction
Documents set forth the entire understanding of the parties hereto with respect
to the transactions contemplated hereby and thereby. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement and the
other Transaction Documents.
11.4 Assignment and Binding Effect. This Agreement may not be assigned
by either party without the prior written consent of the other party; provided
that Purchaser may assign this Agreement to any Affiliate thereof without such
consent. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective executors, heirs, personal representatives,
successors and permitted assigns.
11.5 Notices. Any notice or other communication under this Agreement
shall be in writing and shall be sent by (a) personal delivery, (b) registered
or certified mail (return receipt requested) or (c) nationally recognized
overnight courier service, to such party, at the address of such party set forth
below or such other address as any party may designate in the manner prescribed
in this Section. A notice or other communication shall be deemed to have been
duly received (i) if personally delivered, on the date of such delivery, (ii) if
mailed, on the date set forth on the return receipt or (iii) if delivered by
overnight courier, on the date of such delivery (as evidenced by the receipt of
the overnight courier service). Such communications, to be valid, must be
addressed as follows:
If to Purchaser, to:
GVI Security, Inc.
1200 West Northwest Highway
Suite 100
Grapevine, TX 76051
Attn: Thomas Wade
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With a required copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre
Pittsburgh, PA 15232
Attention: Paul De Rosa, Esq.
If to Seller, to:
Sensory Science Corporation
7835 E. McClain Dr.
Scottsdale, AZ 85260
Attention: President
With a required copy to:
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, AZ 85004-0001
Attention: Samuel C. Cowley, Esq.
or to such other address or to the attention of person or persons as the
recipient party has specified by prior written notice to the sending party (or
in the case of counsel, to such other readily ascertainable business address as
such counsel may hereafter maintain). If more than one method for sending notice
as set forth above is used, the earliest notice date established as set forth
above shall control.
11.6 Interpretation. Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular, the
singular the plural, and the part the whole, (b) "or" has the inclusive meaning
frequently identified with the phrase "and/or" and (c) "including" has the
inclusive meaning frequently identified with the phrase "but not limited to."
The section and other headings contained in this Agreement are for reference
purposes only and shall not control or affect the construction of this Agreement
or the interpretation thereof in any respect. Section, subsection, schedule and
exhibit references are to this Agreement unless otherwise specified. Each
accounting term used herein that is not specifically defined herein shall have
the meaning given to it under GAAP.
11.7 Governing Law. This Agreement shall be construed and interpreted
in accordance with the laws of the State of Delaware, without regard to its
provisions concerning conflict of laws.
11.8 No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and, in the case of Article X hereof, the other indemnified
parties, and their heirs, executors, administrators, legal representatives,
successors and permitted assigns, and they shall not be construed as conferring
any rights on any other persons.
11.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be binding as of the date first written above,
and all of which shall constitute one and the same instrument. Each such copy
shall be deemed an original, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
11.10 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
11.11 Specific Performance. Seller agrees that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed by it in accordance with the terms hereof and that Purchaser shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
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11.12 Amendment and Waiver. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto.
Purchaser may waive compliance by Seller, and Seller may waive compliance by
Purchaser, by an instrument in writing signed by or on behalf of the party
waiving compliance, with any term or provision of this Agreement that the other
party was or is obligated to comply with or perform.
11.13 Headings and "Person." All section headings contained in this
Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement. Any reference to a "Person" herein shall include an individual, firm,
corporation, partnership, trust, governmental authority or body, association,
unincorporated organization or any other entity.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto on the date first written above.
GVI SECURITY, INC.
By: /s/ Thomas Wade
---------------------------------
Thomas Wade,
President
SENSORY SCIENCE CORPORATION
By: Roger B. Hackett
---------------------------------
Roger B. Hackett,
Chairman and Chief Executive Officer
